News eDaily28 Apr 2017

Australia:Insurers fighting off lawyers to curb claims

28 Apr 2017

The insurance sector and the government are tightening up lawyers' involvement in compulsory third-party (CTP) vehicle insurance schemes and in life insurance and disability claims, which were seen to have helped plunge the sector into deep unprofitability in recent years.

Reforms are now being considered by the life insurance industry to limit the involvement of lawyers and to head off their engagement by processing claims faster, reported the newspaper The Australian.

In addition, the New South Wales, Queensland and South Australian governments have unveiled reforms for CTP insurance. NSW plans to cut the amount of fraudulent and exaggerated claims and put a six-month limit on benefits for less severe motor accident injuries, essentially cutting off support for “soft tissue and minor” injuries after that point. Legal experts estimate up to a third of people injured in motor accidents will lose the right to benefits under the new scheme.

In CTP, insurers are pushing premiums ever higher in a bid to shed market share and return to profit. Following the announcement of the NSW government reforms, lawyers are now rushing to get claims settled before the scheme is revamped.

The explosion in claims caused hefty premium price increases as the industry attempted to recoup losses. Average premiums surged 215% for death and total and permanent disability cover over the past four years, while income protection rates have risen a cumulative 82%.

CTP policies in NSW have nearly doubled in a decade to more than A$700 (US$522) a year, with more than half the cost chewed up in scheme fees, which count legal fees and company profits.

The sector-wide blowout in claims came first in life insurance policies and then moved on to CTP schemes, and took insurers and the Australian Prudential Regulation Authority (APRA) by surprise. 

But as reforms are pushed through the insurance system, insurance executives and regulators are wondering which class of business lawyers will turn to next,

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